Moody’s to Issue Life Securitization Methodology

Moody’s is planning to issue its first ratings methodology for life securitization in the next several weeks, said Rodrigo Araya, analyst and senior vice president for the credit ratings firm.

Araya explained that the document will cover Moody’s approach to rating life settlement, embedded value and catastrophic mortality transactions. The firm’s methodology for rating XXX and A/XXX transactions will also be included.

The report is expected to be completed and published by the end of June after a “final sign-off” by the firm’s credit policy group, Araya said.

“We have been working on it for quite a while,” Araya said at the Life Insurance-Linked Investment Conference sponsored by Marcus Evans last week. “It’s very complex because we are trying to address all the types of transactions and it needs to be very detailed.”

The Securities and Exchange Act of 1934 requires all nationally recognized statistical rating organizations (NSROs) to publish descriptions of their ratings processes for industry sectors where they offer credit opinions. The methodologies are then used by issuers and investors to determine how to bring a securitization to the market or if a particular investment is credit worthy.

Araya said that even though the life securitization market has been frozen because of the credit crisis Moody’s determined a sector-specific methodology was needed.

“The life insurance securitization market has suffered, but we haven’t been idle,” he explained. “But we have been conducting surveillance on the market.”

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